"Too often people in the industry talk as if once a borrower drops into the near prime category, then they are there forever, but we feel that’s a mistake"
FR: Atom Bank has made a series of changes to its pricing and criteria for near prime borrowers recently. What’s been behind that?
Near prime borrowers are really quite underserved by the mortgage market, and we wanted to address that.
I think it’s pretty clear that there has never been a greater need for lenders to be able to accommodate borrowers who may have the odd payment issue on their record. The last five years or so have been incredibly tough for many people financially, with the pandemic followed so quickly by the cost of living crisis, so it’s hardly a shock that some people have missed a payment or two in that time. The Money and Pensions Service suggests that around one in three adults missed a payment in 2023, which is an awful lot of people, while there will be many more who struggled to make their payments in the preceding years.
It's wrong that these potential borrowers then have few options should they want to purchase a property or simply remortgage, should that have been a blip. Brokers tell us that they are seeing more clients who fall into the near prime category, and we want to be the go-to choice for them.
FR: Where do near prime borrowers need more support from lenders?
We work closely with brokers when it comes to designing our products and criteria, and a common piece of feedback from advisers was that many lenders in this space have not really kept up with what near prime customers look like.
For example, the limits around unsatisfied defaults - and when those defaults occurred - are overly prescriptive, meaning perfectly good borrowers are excluded.
Our criteria changes are designed to reflect this, with the level of unsatisfied registered defaults an applicant can have more than doubling from £1,000 to £2,500. It’s important to understand that this is the amount still owed, not the original charge amount, meaning that Atom Bank is well placed to support those who may have incurred higher charges but who have made real progress in paying back what they owe.
Looking specifically at unsatisfied registered defaults for communication and utility bills - which have been such a big driver of payment worries in recent years - the cap has been doubled to £500.
We have also cut the look back period for defaults from three years to two.
Another aspect of near prime support that doesn’t get mentioned often enough is the path back to prime. Too often people in the industry talk as if once a borrower drops into the near prime category, then they are there forever, but we feel that’s a mistake - we should be working together to help them move on from those historical issues and regain prime status.
When the time comes to refinance, Atom Bank will look to offer the borrower a prime rate if they meet the relevant criteria. As a lender that works with both prime and near prime customers, we can offer greater value in delivering a direct route back to prime products. That’s not an option with a specialist lender, which will only be able to offer a further near prime rate, inevitably leaving the borrower worse off.
FR: Atom talks a lot about the importance of speed in the mortgage process. Does that apply to near prime borrowers too?
Absolutely - I think you could argue that it’s even more important for near prime customers.
One of the big benefits that come from a swift process is certainty, so that both the borrower and their broker know where they stand. If the customer has set their heart on a property, then there are always going to be some sleepless nights if they don’t get a quick answer on whether they will be able to raise the sums needed for the purchase. That stress is only likely to be heightened if they know they have the odd credit blip in their history which means they fall outside of being the perfect borrower.
That’s why it’s so crucial to be able to provide speedy answers, to make sure that applicants aren’t waiting weeks for a response or clarity over where they stand.
What’s more, we ensure that near prime customers get a free standard valuation, and have the option of adding the arrangement fee to the mortgage amount, removing the need to pay any upfront fees to Atom. In addition, the product is locked in based on the LTV of the case rather than the credit profile of the borrower - there’s no moving of the goalposts after the submission, which we know is such a bugbear of brokers when working with near prime customers. Our focus is on delivering a fast, stress-free experience.
FR: What has been the feedback from brokers around your focus on speed?
It’s been really positive. In fact, speed was one of the big factors in Atom Bank being named top bank in the latest Lender Benchmark from Smart Money People, our speed and online tools and systems scoring particularly highly, with a 92% rating from intermediaries.
Ultimately brokers see a tangible benefit from lenders improving their speeds. The fact that answers are provided quickly means they also enjoy some certainty around the status of a case, and aren’t having to spend time every week chasing up lenders for updates.
That a bank as young as Atom Bank has topped the Smart Money People poll for two straight surveys over a year is incredible, and demonstrates just what an impact we are having. Our focus on speed has been front and centre of our work with brokers, and it’s clear that it’s not going unnoticed.
